P&C Reinsurers Keen on Automation

It is an uncertain time for reinsurers given the myriad effects of the Deepwater Horizon disaster still far from fully understood and realized. Perhaps coincidentally, solutions provider StoneRiver released results of its recent survey tracking interests and trends for the coming year for reinsurers.

In its third annual survey, StoneRiver asked CFOs at U.S. property/casualty carriers about their experiences with reinsurance administration, and the results mirror those of the past two. For the third year, the lack of reinsurance automation is the hottest reinsurance issue, according to 43% of respondents. StoneRiver says this is of interest because all respondents this year rated their companies as average or above in how well they manage reinsurance recoverables. Organizational concern about automation possibly stems from not having automation for aggregation in the event of a catastrophe, the vendor posits. Another potential reason given is that respondents feel comfortable with the status of reinsurance recoverables, but face concern from others about the lack of automation. An entirely automated system dramatically reduces the likelihood of errors due to manual processes, StoneRiver says.

The next biggest concerns centered around the Model Audit Rule and potentially inaccurate spreadsheets, which tied for the second most pressing issue, receiving a vote from nearly 36% of respondents. Roughly 29% said their biggest issue is losing personnel who know reinsurance either to other companies or retirement.

When asked how their companies manage reinsurance administration, 47% of respondents said management is automated. However, 82% said that collections management continues to be performed by spreadsheet or manual methods. Less than half responding (44%) already use a ceding engine for reinsurance administration, compared to 53% in 2009, and 36% in 2008. This year, 31% have a system that automatically identifies and attaches reinsurance per contract terms, whereas 47% had that capability in 2009, and 29% in 2008.

Additionally, 36% of respondents indicated that the current market has had no impact on the company’s reinsurance book, while nearly 36% also reported that they are reinsuring even more as a result of the market.

“This type of research is an important part of our product development research,” Gary Sherne, president, StoneRiver – Insurance Solutions said in the report. “Conducting an annual survey in key segments allows us to monitor that market, listen to our constituents and gather information pertinent to our business strategies. The low levels of automation, especially in collections, indicate that this space is underserved, and that there are significant opportunities to improve processes through automation.”